criminal how lockup quotas and low crime taxes guarantee profits for private prison corporations

How Lockup Quotas and ldquoLow-Crime Taxesrdquo

Guarantee Profits for Private Prison Corporations

A Publication of In the Public Interest | S e P T e m b e r 2 0 1 3

Criminal

I n T H e P u b L I C I n T e r e S T

How Lockup Quotas and ldquoLow-Crime Taxesrdquo Guarantee Profits Guarantee Profits 2

Major Findingspound 65 percent of the private prison contracts ITPI received and analyzed included occupancy

guarantees in the form of quotas or required payments for empty prison cells (a ldquolow-crime taxrdquo)

These quotas and low-crime taxes put taxpayers on the hook for guaranteeing profits for private

prison corporations

pound Occupancy guarantee clauses in private prison contracts range between 80 and 100 with

90 as the most frequent occupancy guarantee requirement

pound Arizona Louisiana Oklahoma and Virginia are locked in contracts with the highest

occupancy guarantee requirements with all quotas requiring between 95 and 100 occupancy

State-specific Findingspound Colorado Though crime has dropped by a third in the past decade an occupancy requirement

covering three for-profit prisons has forced taxpayers to pay an additional $2 million

pound Arizona Three Arizona for-profit prison contracts have a staggering 100 quota even though a

2012 analysis from Tucson Citizen shows that the companyrsquos per-day charge for each prisoner has

increased an average of 139 over the life of the contracts

pound Ohio A 20-year deal to privately operate the Lake Erie Correctional Institution includes a 90 quota

and has contributed to cutting corners on safety including overcrowding areas without secure doors

and an increase in crime both inside the prison and the surrounding community



Introduction

I n 2012 Corrections Corporation of America (CCA) the largest for-profit private prison company in the

country sent a letter to 48 state governors offering to buy their public prisons CCA offered to buy and operate a statersquos

prison in exchange for a 20-year contract which would include a 90 percent occupancy rate guarantee for the entire

term1 Essentially the state would have to guarantee that its prison would be 90 percent filled for the next 20 years (a

quota) or pay the company for unused prison beds if the number of inmates dipped below 90 percent capacity at any

point during the contract term (a ldquolow-crime taxrdquo that essentially penalizes taxpayers when prison incarceration rates fall)

Fortunately no state took CCA up on its outrageous offer But many private prison companies have been successful at

inserting occupancy guarantee provisions into prison privatization contracts requiring states to maintain high occupancy

levels in their private prisons

For example three privately-run prisons in Arizona are governed by contracts that contain 100 percent inmate quotas2

The state of Arizona is contractually obligated to keep these prisons filled to 100 percent capacity or pay the private

company for any unused beds

These contract clauses incentivize keeping prison beds filled which runs counter to

many statesrsquo public policy goals of reducing the prison population and increasing

efforts for inmate rehabilitation When policymakers received the 2012 CCA letter

some worried the terms of CCArsquos offer would encourage criminal justice officials to

seek harsher sentences to maintain the occupancy rates required by a contract3

Policy decisions should be based on creating and maintaining a just criminal justice

system that protects the public interest not ensuring corporate profits

Bed guarantee provisions are also costly for state and local governments As

examples in the report show these clauses can force corrections departments

to pay thousands sometimes millions for unused beds mdash a ldquolow-crime taxrdquo that

penalizes taxpayers when they achieve what should be a desired goal of lower

incarceration rates The private prison industry often claims that prison privatization

saves states money Numerous studies and audits have shown these claims of cost

savings to be illusory4 and bed occupancy requirements are one way that private

prison companies lock in inflated costs after the contract is signed

1 Chris Kirkham ldquoPrivate Prison Corporation Offers Cash in Exchange for State Prisonsrdquo Huffington Post February 14 2012 httpwwwhuffingtonpostcom20120214private-prisons-buying-state-prisons_n_1272143html

2 American Friends Service Committee of Arizona Cell-Out Arizona Exclusive ldquoPart II Arizona For-Profit Prison Costs Rose 14 Now Guarantee 100 Occupancyrdquo August 3 2012 httptucsoncitizencomcell-out-arizona20120803cell-out-arizona-exclusive-part-ii-arizona-for-profit-prison-costs-rose14-now-guarantee-100-occupancy

3 Kevin Johnson ldquoPrivate purchasing of prisons locks in occupancy ratesrdquo March 8 2012 httpusatoday30usatodaycomnewsnationstory2012-03-01buying-prisons-require-high-occupancy534028941

4 A Sept 2010 report by Arizonarsquos Office of the Auditor General found that privately-operated prisons housing minimum-security state prisoners actually cost $33 per diem more than state prisons ($4681 per diem in state prisons vs $4714 in private prisons) while private prisons that house medium-security state prisoners cost $776 per diem more than state facilities ($4813 per diem in state prisons vs $5589 in private prisons) after adjusting for comparable costs See httpwwwazauditorgovReportsState_AgenciesAgenciesCorrections_Department_ofPerformance10-0810-08pdf

ldquoYou donrsquot want a prison system

operating with the goal of

maximizing profitshellipThe only

thing worse is that this seeks to

take advantage of some statesrsquo

troubled financial positionrdquo

mdash Texas sTaTe sen John WhiTmire

in response to the CCA letter



This ReportThis report will discuss the use of prison bed occupancy guarantee clauses in prison privatization contracts and explore

how bed occupancy guarantees undermine criminal justice policy and democratic accountable government Section 1

explains the for-profit private prison industryrsquos reliance on high prison populations and how these occupancy guarantee

provisions directly benefit its bottom line Section 2 discusses the prevalence of bed guarantee clauses drawing on a

set of contracts that ITPI obtained through state open records requests Section 3 describes how occupancy guarantees

have harmed states focusing on the experiences of Arizona Colorado and Ohio mdash three states that have agreed to these

provisions to detrimental consequences Lastly Section 4 will discuss our recommendation that governments can and

should reject prison occupancy guarantees

S e c t i o n 1

Why quotas are important to the for-profit private prison company business model

The private prison industry has promoted policies and practices that increase the number of people who enter and stay in prison It is no surprise that the two major private prison companies CCA

and GEO Group have had a hand in shaping and pushing for criminal justice policies such as mandatory minimum

sentences that favor increased incarceration In the past they have supported laws like Californiarsquos three-strikes law and

policies aimed at continuing the War on Drugs5 More recently in an

effort to increase the number of detainees in privately-run federal

immigration detention centers they contributed to legislation like

Arizona Senate Bill 1070 requiring law enforcement to arrest anyone

who cannot prove they entered the country legally when asked6 The

industryrsquos reliance on a harsh criminal justice system is summed up in a

statement from CCArsquos 2010 annual report ldquoThe demand for our facilities

and services could be adversely affected by the relaxation of enforcement

efforts leniency in conviction or parole standards and sentencing practices

or through the decriminalization of certain activities that are currently

proscribed by our criminal lawsrdquo7

5 Dina Rasor ldquoPrison Industries Donrsquot Let Society Improve or We Lost Businessrdquo Truthout April 26 2013 httpstruth-outorgnewsitem8731-prison-industries-dont-let-society-improve-or-we-lose-business-part-i

6 Laura Sullivan ldquoPrison Economics Help Drive Ariz Immigration Lawrdquo National Public Radio October 28 2010 httpwwwnprorg20101028130833741prison-economics-help-drive-ariz-immigration-law

7 CCArsquos 2010 Annual Report on Form 10-K

ldquoHistorically we have been

successful in substantially filling

our inventory of available beds

and the beds that we have

constructed Filling these available

beds would provide substantial

growth in revenues cash flow and

earnings per sharerdquo

mdash CCA 2010 AnnuAl RepoRt



These companies also spend large amounts of money to lobby federal and state lawmakers to advance policies that

protect their bottom line and keep pro-privatization lawmakers in office The Center for Responsive Politics reports that

CCA spent $174 million in lobbying expenditures from 2002 through 20128 while GEO Group spent $25 million from 2004

to 20129 Similarly CCA spent $19 million in political contributions from 2003 to 201210 and Geo Group spent $29 million

during the same time period11

While the for-profit prison industry works

hard to ensure harsh criminal laws and elect

policymakers that support its agenda bed

guarantee contract provisions are an even

more direct way that private prison companies

ensure that prison beds are filled These

companies rely on occupancy guarantee

clauses in government contracts to guarantee

profits and reduce their financial risk since

the ability of private prison companies to

ensure prison beds are filled generates steady

revenues These contract requirements are an

important tool in private prison corporationsrsquo

efforts to maximize profits Private prison

companies have negotiated these clauses

in both older existing contracts and newer

amendments They have even lobbied

lawmakers to impose bed guarantees on

prison facilities as the below example from

Colorado shows Private prison companies

make no secret that high occupancy rates are

critical to the success of their business During

a 2013 first quarter conference call GEO Group

boasted that the company continues to have

ldquosolid occupancy rates in mid to high 90srdquo12

By contractually requiring states to guarantee

payment for a large percentage of prison

beds the prison companies are able to protect themselves against fluctuations in the prison population These provisions

guarantee prison companies a consistent and regular revenue stream insulating them from ordinary business risks

The financial risks are borne by the public while the private corporations are guaranteed profits from taxpayer dollars

8 Center for Responsive Politics httpwwwopensecretsorglobbyclientsumphpid=D000021940ampyear=2002 9 Center for Responsive Politics httpwwwopensecretsorglobbyclientsumphpid=D000022003ampyear=2004 10 National Institute on Money in State Politics httpwwwfollowthemoneyorgdatabasetopcontributorphtmlu=695ampy=0 11 National Institute on Money in State Politics httpwwwfollowthemoneyorgdatabasetopcontributorphtmlu=1096ampy=0 12 Nicole Flatow ldquoPrivate Prison Profits Skyrocket As Executives Assure Investors Of lsquoGrowing Offender Populationrsquordquo Think Progress May 9 2013 httpthinkprogress

orgjustice201305091990331private-prison-profits-skyrocket-as-executives-assure-investors-of-growing-offender-population



S e c t i o n 2

The Prevalence of Quotas in Contracts

To understand the prevalence of prison occupancy guarantee provisions in prison privatization contracts In the Public Interest (ITPI) analyzed numerous contracts between states and local jurisdictions and

private prison companies ITPI identified 77 county and state-level private facilities nationwide and collected and analyzed

62 contracts from these facilities These contracts each relate to the operation of an individual facility within the state or

locality The contracts that we collected were either given to us by state-level organizations that already had the contracts

in their possession or we utilized the open records request process with state and local governments ITPI is currently

following up with states to collect additional information

Of the contracts that we reviewed 41 (65 percent) contained quotas These occupancy requirements were between 80

percent and 100 percent with many around 90 percent The highest bed guarantee requirements were from Arizona

Louisiana Oklahoma and Virginia As mentioned above Arizona has three contracts that contain 100 percent occupancy

guarantee clauses Oklahoma has three contracts with

a 98 percent occupancy guarantee provision while

a couple of Louisianarsquos contracts contain occupancy

requirements at 96 percent and Virginia has one at 95

percent All major prison companies CCA GEO Group

and Management and Training Corporation (MTC)

have been successful in negotiating prison quotas in

contracts

Interestingly prison companies have also been

successful at winning bed guarantee promises even

after a contract that contains no such provision is

executed Many of these bed guarantee clauses were

added after the initial contract was signed usually

in a contract amendment This is consistent with the

prison industryrsquos approach to revenue growth In CCArsquos

2010 Annual Report the company explicitly cites

ldquoenhancing the terms of our existing contractsrdquo as one of the approaches it uses to develop its business13 Additionally

bed guarantee clauses may be imposed completely outside the contracting process As discussed in more detail in the

next section CCA was able to insert a bed guarantee requirement for private facilities into the Colorado fiscal year 2013

state budget completely circumventing the contract amendment process14 The percentage of facilities that actually have

bed guarantee requirements may be higher than an analysis of their contracts alone indicate

13 CCArsquos 2010 Annual Report on Form 10-K page 10 14 Colorado WINS ldquoImprisoned by Profit Breaking Coloradorsquos Dependency on For-Profit Prisons February 27 2013

httpcoloradowinsorg20130227imprisoned-by-profit-breaking-colorados-dependence-on-for-profit-prisons

n No clause

n 95 ndash 100

n 90 ndash 94

n Below 90

n Other

Occupancy Guarantee Provision



S e c t i o n 3

Impacts of Prison Quotas

B ed guarantee clauses can have measureable impacts on a statersquos criminal justice policy the state budget

the functioning of a specific facility and the community This section focuses on the experiences of Colorado Arizona

and Ohio and describes the specific impacts that bed guarantee clauses have had on their states All three states have

prison facilities operated by private prison companies with occupancy guarantees in their contracts and all three states

have suffered detrimental consequences as a result

ColoradoColorado has experienced a sizable reduction in its prison population

In the past decade the crime rate has dropped by a third and since

2009 five prisons have been closed The state projects that two to ten

additional prisons could close in the near future depending on the size of

the facilities chosen15 This decrease in prison population propelled CCA

which operates three private prisons in the state to take action Last year

CCA negotiated the insertion of a bed guarantee provision in the state

budget for all three of its facilities for the 2013 fiscal year Even though all

three contracts for these facilities include explicit language specifying that

ldquothe state does not guarantee any minimum number of offenders will be

assigned to the contractorsrsquo facilityrdquo the company was able to circumvent the contracting process and mandate occupancy

guarantees long after the contract was negotiated and signed

In 2012 the state began a utilization study to analyze which facilities made the most sense to close but did not want

any to shut down any facilities until the formal analysis was complete In response to these preliminary discussions

CCA threatened to close one of its private facilities Behind closed doors and without any public hearings CCA and the

Governorrsquos Office and the Joint Budget Committee negotiated a deal16 In exchange for keeping the facility open the state

agreed to a bed guarantee which required Colorado to keep at least 3300 prisoners in the three CCA facilities at an annual

rate of $20000 per inmate for the 2013 fiscal year17

Instead of using empty bed space in its state-run facilities the Colorado Department of Corrections housed inmates in

CCArsquos facilities to ensure they met the occupancy requirement Colorado taxpayers must pay for the vacant state prison

beds and for the per diem rate for inmates redirected to the CCA facility to fulfill the bed guarantee18 The Colorado

Criminal Justice Reform Coalition estimates that the deal cost the state at least $2 million19 The Colorado Springs Gazette

notes that the figure could be even higher As of March 2013 the state already had 1000 empty beds in various state

prisons and that number was projected to increase by almost 100 beds per month20 Legislators predicted that the inmate

15 Ann Imse ldquoState pays millions as prison populations sinkrdquo Colorado Springs Gazette March 9 2013 httpgazettecomstate-pays-millions-as-prison-populations-sinkarticle152065

16 Ibid 17 Ibid 18 Colorado Criminal Justice Reform Coalition ldquoPrison population update and overviewrdquo December 3 2012 19 Ann Imse ldquoState pays millions as prison populations sinkrdquo Colorado Springs Gazette March 9 2013 httpgazettecomstate-pays-millions-as-prison-populations-sink

article152065 20 Ann Imse ldquoState pays millions as prison populations sinkrdquo Colorado Springs Gazette March 9 2013 httpgazettecomstate-pays-millions-as-prison-populations-sink

article152065



population would drop between 160 to 1256 people by June 2013 but by February 2013 the total had already fallen

by 1700 inmates21 The occupancy requirement not only ensured that CCA continued to receive a guaranteed level of

revenue each month despite the decrease in inmates but also had the effect of diverting inmates away from available

public prison beds Colorado originally intended its private prisons to be used for overflow purposes but the bed

guarantee provisions allowed it to become the first priority for placement

The below chart shows how the inmate population in CCA facilities decreased as state prison population also decreased

until 2012 when the CCA inmate population increased as a result of the bed guarantee deal

Arizona100 Bed Guarantees at Three Facilities

Private prison companies were successful in inserting the highest

prison bed guarantee into contract amendments for the three oldest

private prison facilities in Arizona Arizona State Prison ndash Phoenix West

and Arizona State Prison mdash Florence West both operated by the GEO

group and the Marana Community Correctional Treatment Facility

operated by Management and Training Corporation (MTC) All three

contracts require the state to fill or compensate the company for every

available bed The bed guarantee provisions were the result of an

agreement between the Arizona Department of Corrections (ADC) and

the private prison companies in 2008 In this ldquodealrdquo the corporations

agreed to lower rates for emergency beds meant to temporarily house

an overflow of prisoners in exchange for the state accepting a 100 percent occupancy guarantee for all regularly-rated

beds in all three facilities Even with the addition of the 100 percent bed guarantee clauses an August 2012 analysis from

Tucson Citizen shows that the per-prisoner per-day rates for the three facilities have increased by an average of 139

percent since the contracts were first awarded 22



4000

3800

3600

3400

3200

3000SEPT2011

JAN2012

MAR2012

JUNE2012

SEPT2012

OCT2012

Source Colorado Criminal Justice Reform Coalition CO DOC monthly population reports

CCA Colorado Total Inmate Population



The details of the contract for the Marana facility reveal an even worse deal for Arizona taxpayers Amendment 14 signed

in June 2011 refers to a dispute between ADC and private prison company MTC in which the company claimed that the

5-year contract renewal was not performed in a timely manner ADC maintained it was The settlement for this dispute

included ADC paying the company for 500 beds including 50 which were identified as reduced-rate emergency beds at

the full per diem rate with the 100 percent guaranteed occupancy requirement Incredibly this agreement was applied

retroactively effectively erasing all but three months of the reduced rate for the emergency beds The settlement results in

an additional $2659390 in revenue to MTC through the remainder of the contract which expires in October 201323

Despite MTCrsquos guaranteed revenue the Marana facility has been plagued by safety problems In a security review in August

2010 state inspectors found broken security cameras swamp coolers out of commission insecure doors and windows on

housing units inadequate perimeter lighting and broken control panels that failed to alert staff when inmates opened

exterior doors When inspectors returned in March 2011 to perform the annual audit problems persisted including broken

security cameras and control panels24

Arizona State Prison mdash KingmanThe Kingman facility a prison with a 97 percent

bed guarantee clause has been troubled with

pervasive safety issues ultimately leading to

the escape of three prisoners in July 2010 and

the murder of a New Mexico couple Among the

security issues identified at the MTC-operated

facility that allowed for the escape were a broken

alarm burned-out perimeter lights broken security

equipment and a lackadaisical approach to safety

by the private prison staff including ignoring

alarms leaving their patrol posts and leaving doors

open and unwatched25 After the escape the state

pulled 238 high-risk prisoners out of the facility and

refused to send any additional prisoners to Kingman until MTC fixed the identified problems It took MTC eleven months to

address the issues during which time ADC refused to pay the 97 percent bed guarantee In January 2011 MTC filed a claim

against ADC complaining about the decrease in profits caused by the statersquos refusal to cover the empty beds They asked

for nearly $10 million to cover their losses In another poor deal for Arizonans ADC agreed to return to paying the 97 percent

rate on May 1 2011 even though the empty beds would not yet be filled in exchange for MTC dropping its claim ADC ended

up paying over $3 million for the empty beds26


24 Bob Ortega ldquo2010 escape at Kingman an issue for MTCrsquos bidrdquo The Arizona Republic August 11 2011 httpwwwazcentralcomnewsarticles2011081120110811MTC-bid-issue-2010-escape-at-kingmanhtml

25 Bob Ortega ldquoArizona prisons slow to fix flaws in wake of Kingman escaperdquo The Arizona Republic June 26 2011 httpwwwazcentralcomnewsarticles2011062620110626arizona-prison-safety-improvementshtml

26 Bob Ortega ldquoArizona prison oversight lacking for private facilities state weighs expansion even as costs run highrdquo The Arizona Republic August 7 2011 httpwwwazcentralcomnewsarticles20110807arizona-prison-private-oversighthtml



Ohio Ohiorsquos experiences with prison privatization are plagued with stories

of mismanagement violence and unexpected costs Though crime

rates in the state have been decreasing the private prison industry

continues to ensure that prisons remain as full as possible In both the

Lake Erie Correctional Institution and the North Coast Correctional

Treatment Facility bed guarantees have helped protect the private

prison industryrsquos profits

Lake Erie Correctional InstitutionThe 2011 sale of the Lake Erie Correctional Institution in Conneaut

Ohio to CCA was lauded by the private prison industry as an innovative cost-cutting move that would save the state of

Ohio money while improving the quality of services provided to inmates A look at prison operations after the sale tells a

very different story

Bundled with the sale of the facility was a 20-year contract between the Ohio Department of Rehabilitation and

Correction and CCA for operation of the prison This contract includes a 90 percent bed guarantee clause which holds

Ohio and ultimately its taxpayers accountable for ensuring that 1530 of the 1700 available beds in the prison are

occupied or for compensating for unused beds After purchasing the prison CCA squeezed in an additional 300 beds

even converting an area where prisoner re-entry classes were held into sleeping space27 A November 2012 government

audit found that the addition of the 300 beds brought the facility out of compliance with minimum square footage per

inmate requirements28 The high occupancy requirement especially when applied to a facility not originally designed for

the additional 300 converted beds has contributed to overcrowding and the deplorable conditions and safety issues that

persist in the facility 29

Multiple examples of unacceptable living conditions are described in a troubling government audit from September

201230 The report describes a chronically overcrowded facility with numerous cases of triple bunking cramming three

inmates into a cell designed for two which left inmates sleeping on the floor some without mattresses Recreation

areas without secure doors were used for housing inmates and minimum square footage per inmate requirements were

not observed Numerous other health and safety conditions were noted in the audit as well The overcrowding and

mismanagement of the Lake Erie Correctional Institution has led to numerous safety issues including a rise in violent

incidents and disturbances Both staff and inmates interviewed for the audit reported that personal safety was at risk and

that ldquoassaults fights disturbances and uses of force have all increased in comparison to prior yearsrdquo31 Even the city of

Conneaut has seen increased crime related to the issues at the prison as drugs and other contraband materials thrown

27 Chris Kirkham ldquoLake Erie Prison Plagued by Violence and Drugs After Corporate Takeoverrdquo Huffington Post March 22 2013 httpwwwhuffingtonpostcom20130322lake-erie-prison-violence_n_2925151html

28 Ohio Department of Rehabilitation and Correction 2012 Full Internal Management Audit Report September 25 2012 httpwwwinthepublicinterestorgsitesdefaultfilesprison-audit-report20OHIOpdf

29 The ACLU Ohio continues to monitor the conditions at the Lake Erie Correctional Institution In May 2013 they released a timeline chronicling problems at the facility which can be found at httpwwwacluohioorgcrisis-in-conneaut-timeline

30 Ohio Department of Rehabilitation and Correction LaECI Audit Reinspection November 15 2012 httpbigassetshuffingtonpostcomccareinspectionpdf 31 Gregory Geisler Correctional Institution Inspection Committee Report on the Inspection and Evaluation of the Lake Erin Correctional Institution January 22-23

2013 httpbigassetshuffingtonpostcomlakeeriereportpdf



over the fence for inmates to retrieve have been reported32 The occupancy requirement not only creates perverse

incentives to encourage the facility to keep as many ldquoheads in bedsrdquo but does so at the expense of the health and safety of

the inmates and the larger Conneaut community

North Coast Correctional Treatment FacilityThe privatization experiment at the North Coast Correctional Treatment Facility in Grafton Ohio also suffered as a result

of bed guarantee requirements in its contract In a 2000 contract between the OHDRC and the private prison company

CiviGenics (now part of private prison company Community Education Centers) a 95 percent bed guarantee risked the

safety of the facility Originally intended to house primarily drunk-driving offenders the bed guarantee ensured that even

if the state of Ohio did not convict 665 persons of felony drunk driving offenses they would pay CiviGenics for that level

of operation in their 700-person facility In an effort to fill North Coast to 95 percent capacity the state sent inmates who

had been convicted of more serious crimes including sexual battery assault arson manslaughter and robbery when

it could not fill the facility with drunken-driving offenders33 The facility designed to hold only felony drunken-driving

and nonviolent drug offenders was not properly equipped for these changes in the inmate population and the facility

suffered from riots safety problems and other contract violations as well as unstable staffing including four different

people serving as warden34 Ultimately the contract was taken from CiviGenics and given to another private prison

company Management Training Corporation and later combined with the Grafton Correctional Institution and returned

to public control

As the three case studies show these small contract clauses can have enormous ramifications Bed guarantee clauses

bind the state to pay for beds that they may not need or use at the time of contract signing or at any point in the future

Some prison contracts last for up to 20 years It is virtually impossible for states to predict prison population trends for a

few years forward let alone decades into the future The state loses flexibility to deal with changing circumstances that a

public facility would afford Furthermore states may enact policies or engage in practices that keep prison facilities full

in an effort to fulfill bed occupancy guarantees As the Ohio experience above shows this can lead to facilities holding

more dangerous inmates than they are designed to house Or prisons may be filled beyond capacity leaving a facility

overcrowded and a breeding ground for violence The cities in which these facilities are located may feel the effects of the

increased violence as drug use and gang activity overtake prisons and seep into the community

If the state decides not to keep prison beds filled bed guarantee clauses can wreak havoc on state budgets Numerous

examples show that these provisions can cost states millions of dollars At a time when government budgets are

shrinking cities and states cannot afford the financial risk of prison privatization In the long-term governments

taxpayers and communities cannot afford the damage that these provisions cause to the very foundations of our criminal

justice system


33 ACLU Ohio ldquoPrisons for Profit A Look at Prison Privatizationrdquo httpwwwacluohioorgassetsissuesCriminalJusticePrisonsForProfit2011_04pdf 34 Policy Matters Ohio ldquoSelective Celling Inmate Population in Ohiorsquos Private Prisonsrdquo May 2001 httpwwwpolicymattersohioorgselective-celling-inmate-

population-in-ohios-private-prisons



S e c t i o n 4

Recommendations

B ed guarantee clauses can have broad negative implications for government entities even beyond

obvious financial concerns As discussed in the report these clauses can result in dangerously unsafe conditions

and tie the hands of lawmakers and correctional agencies Our analysis leads to one clear conclusion bed guarantee

clauses should be prohibited in any private prison contract We offer the following recommendations on ways to avoid

the pitfalls that come with bed guarantees

Governments Can and Should Reject Bed Guarantee ClausesAs ITPIrsquos analysis shows there are a number of private prison contracts without bed guarantee clauses In our review of

many Texas private prison contracts we found that no contract contained a bed guarantee clause The statersquos contracts

with private prisons specifically state that the payment schedule is based on occupancy levels determined by the official

count of the number of inmates who are present at the facility at the end of each day calculated at midnight (what

Texas refers to as the ldquoThe Midnight Strength Reportrdquo) State and local governments should not agree to bed guarantee

provisions during the initial contract signing or any subsequent amendment Instead payments to the contractor should

be based on the actual daily count of the number of inmates housed in a facility Enacting state legislation that prohibits

occupancy guarantee clauses allows the government contracting agency to take the discussion of these provisions out of

the negotiating process and reject them based on state law

Prison occupancy quotas require the government to spend public dollars on housing and supervision of a certain

number of inmates whether a prison is empty or full With governmental priorities pulling public funds in so many

different directions it makes no financial sense for taxpayers to fund empty prison beds From a financial standpoint bed

guarantee clauses are insupportable for government entities

Private prison companies often attempt to lure governments into agreements with bed guarantee clauses by promising a

lower per diem cost However bed guarantees do not secure jurisdictions lower per diem rates as evidenced by Arizonarsquos

experience of per diem rates rising 139 percent even after the bed guarantee was added to the contracts35 With better

understanding of the per diem rates in private prison contracts in similar facilities in other jurisdictions governments can

negotiate reasonable per diem rates without resorting to bed guarantees

Bed guarantee clauses can also tie the hands of lawmakers If lawmakers determine that there are more effective ways of

dealing with specific criminal offenses than prison time bed guarantee clauses may restrict their options If lawmakers

pass rules that have the effect of decreasing the prison population if law enforcement officials take action that results in

a reduced prison population or if the crime rate simply drops the government might be responsible for funding empty

prison beds In the words of Roger Werholtz former Kansas secretary of corrections ldquoMy concern would be that our state

would be obligated to maintain these (occupancy) rates and subtle pressure would be applied to make sentencing laws

more severe with a clear intent to drive up the populationrdquo36

Furthermore private corporations interested in running public prisons should be forced to run a competitive business in

35 American Friends Service Committee of Arizona Cell-Out Arizona Exclusive ldquoPart II Arizona For-Profit Prison Costs Rose 14 Now Guarantee 100 Occupancyrdquo August 3 2012 httptucsoncitizencomcell-out-arizona20120803cell-out-arizona-exclusive-part-ii-arizona-for-profit-prison-costs-rose14-now-guarantee- 100-occupancy




the open market When entering a contract to operate a prison a private company should be required to take on some

risk If the company fails to perform well a bed guarantee clause should not serve as the companyrsquos financial safety net

In many cases private prison beds were intended to be a safety valve to address demand that exceeded public capacity

It was never intended that taxpayers would be the safety valve to ensure private prison companiesrsquo profits

Elimination of bed guarantee clauses will allow lawmakers to enact policies that are in the public interest not in a private

prison corporationrsquos financial interest Corrections agencies should not be forced to direct prisoners to certain private

facilities because of bed guarantee clauses Criminal justice policy and programs should be guided by our public goals

such as reducing the number of people in prison Rejecting bed guarantee clauses allows public officials to make the best

decisions in the publicrsquos interest

For additional information about public interest protections in prison privatization contracts please see In the Public Interestrsquos

October 2012 publication titled ldquoEssential Public Interest Protections for Prison Privatization Contractsrdquo at

httpwwwinthepublicinterestorgsitesdefaultfilesPrison_Privatization_FINALpdf

In the Public Interest also recently released a set of legislative proposals called the Taxpayer Empowerment Agenda Among other

important responsible contracting provisions this agenda encourages lawmakers to ban contract language that guarantees

company profits including provisions such as occupancy guarantees You can find the full Taxpayer Empowerment Agenda at

httpwwwinthepublicinterestorgsitesdefaultfilesITPI-The-Taxpayer-Empowerment-Agendapdf







AppendixThe below chart documents the privatized facilities identified by In the Public Interest and includes information about

which contracts ITPI received and which contracts contained occupancy guarantee clauses

Facility Company Location Customer Have Contract

expiration Date

(if known)Occupancy Guarantee

Hudson Correctional Facility GEO Hudson CO AK Current September 2013 Section 401 mdash 80 with exceptions for ramp-up or ramp-down or transportation dates

Arizona State Prison mdash Florence West

GEO Florence AZ AZ October 2017 100

Arizona State Prison mdash Phoenix West

GEO Phoenix AZ AZ Current July 2017 Amendments 7 9 11 100 for emergencytemporary beds

Central Arizona Correctional Facility

GEO Florence AZ AZ December 2016

Arizona State Prison mdash Kingman MTC Kingman AZ AZ Current 97 according to AFSC AZ Amendment 2 mdash 90

Marana Community Correctional Treatment Facility

MTC Marana AZ AZ Current Amendment 9 mdash 100 for specified period

La Palma Correctional Center CCA Eloy AZ CA Current June 2013 Section 301 mdash 90

North Fork Correctional Facility CCA Sayre OK CA Current June 2013 Section 301 mdash 90

Tallahatchie County Correctional Facility

CCA Tutwiler MS CA Current June 2013 Section 301 mdash 90

Central Valley Modified Community Correctional Facility

GEO McFarland CA CA 2012 Exhibit 614 Amendment 9 mdash 90

Desert View Community Correctional Facility

GEO Adelanto CA CA 2012 Exhibit A G7 Amendment 9 mdash 90

Golden State Medium Community Correctional Facility

GEO McFarland CA CA Current June 2016 Exhibit 614 mdash 90

McFarland Community Correctional Facility

GEO McFarland CA CA 2010 Exhibit B 1C mdash 70

Red Rock Correctional Center CCA Eloy AZ CAHI Current CA portion

January 2024 Section 301 mdash 90

Bent County Correctional Facility CCA Las Animas CO CO Outdated June 2013 Included in 20122013 budget guarantee for 3300 beds for all CCA facilities Contract 211 ldquoThe State does not guarantee any minimum number of Offenders will be assigned to Contractorrsquos Facilityrdquo

Crowley Correctional Facility CCA Olney Springs CO CO Current June 2013 Included in 20122013 budget guarantee for 3300 beds for all CCA facilities Contract 211 ldquoThe State does not guarantee any minimum number of Offenders will be assigned to Contractorrsquos Facilityrdquo

Correctional Treatment Facility CCA Washington DC DC

Bay Correctional Facility CCA Panama City FL FL Current July 2013 p 93 Section 71 mdash 90

Graceville Correctional Facility CCA Graceville FL FL Current September 2013 Section 71 mdash 90

Lake City Correctional Facility CCA Lake City FL FL 2009 Indefinite Original contract section 7 mdash 90

Moore Haven Correctional Facility CCA Moore Haven FL FL Current July 2013 Section 71 mdash 90

Citrus County Detention Facility CCA Lecanto FL Citrus County FL

Current September 2015

Blackwater River Correctional Facility

GEO Milton FL FL Current April 2013 Section 71 mdash 90

South Bay Correctional Facility GEO South Bay FL FL 2009 July 2014 Article 7 mdash 90

Gadsden Correctional Institution MTC Gadsden FL FL Current p 98 71 mdash 90continued


expiration Date


Coffee Correctional Facility CCA Nicholls GA GA Current June 2013 2011 amendment mdash 90

Jenkins Correctional Center CCA Millen GA GA Current Original contract p 2 part 2B amp 2013 amendment mdash 90

Wheeler Correctional Facility CCA Alamo GA GA Current June 2013 2011 2012 2013 amendments mdash 90

Riverbend Correctional Facility GEO Milledgeville GA GA Current July 2013 Section mdash 90 guarantee

Saguaro Correctional Center CCA Eloy AZ HI June 2014

Idaho Correctional Center CCA Kuna ID ID Current June 2014

Kit Carson Correctional Center CCA Burlington CO ID Current July 2014 Included in 2012-2013 budget guarantee for 3300 beds for all CCA facilities Contract 211 ldquoThe State does not guarantee any minimum number of Offenders will be assigned to Contractorrsquos Facilityrdquo

Idaho Capp Facility MTC Kuna ID ID Current Section 32 mdash No guarantee for the first 6 months and then 80 (320400 beds)

Marion County Jail II CCA Indianapolis IN IN December 2017

New Castle Correctional Facility GEO New Castle IN IN Current January 2015 Amendment 4 mdash 90 also fixed monthly payments for annex

Plainfield Indiana STOP Facility GEO Plainfield IN IN Current March 2015

Marion Adjustment Center CCA St Mary KY KY June 2013

Winn Correctional Center CCA Winnfield LA LA Current June 2020 Section 31 mdash 96

Allen Correctional Center GEO Kinder LA LA Current July 2020 Section 31 mdash 96

Wilkinson County Correctional Facility

CCA Woodville MS MS June 2013

East Mississippi Correctional Facility

MTC Meridian MS MS

Marshall County Correctional Facility

MTC Holly Springs MS MS

Walnut Grove Correctional Facility MTC Walnut Grove MS MS

Crossroad Correctional Facility CCA Shelby MT MT August 2013

New Mexico Womenrsquos Correctional Facility

CCA Grants NM NM Current June 2013 Section 41 mdash 580611 (95)

Guadalupe County Correctional Facility

GEO Santa Rosa NM NM Current Section 41 mdash 90

Lea County Correctional Facility GEO Hobbes NM NM Current Section 41 mdash 90

Northeast New Mexico Detention Facility

GEO Clayton NM NM Current August 2013 Daily credit for unoccupied beds during initial 60-day ramp-up period

Lake Erie Correctional Institution CCA Conneaut OH OH Current June 2032 Original contract w MTC page 12 mdash 95 more recent w CCA noted in attachment 7 cost summary mdash90

North Central Correctional Complex

MTC Marion OH OH

Cimarron Correctional Facility CCA Cushing OK OK Current June 2014 Original contract Article 7 amndmt 5 amp 6 mdash 98

Davis Correctional Facility CCA Holdenville OK OK Current June 2014 Original contract article 7 amndmts 5 amp 6 mdash 98

Lawton Correctional Facility GEO Lawton OK OK Current June 2013 Amendments 1 amp 2 Article 7 mdash 98 continued


expiration Date


Hardeman County Correctional Center

CCA Whiteville TN TN May 2015

South Central Correctional Center CCA Clifton TN TN 2007

Whiteville Correctional Facility CCA Whiteville TN TN June 2016

Metro-Davidson County Detention Facility

CCA Nashville TN Davidson County TN

Current July 2014 Section 61 mdash 90

Silverdale Detention Facilities CCA Chattanooga TN Hamilton County TN

Bartlett State Jail CCA Bartlett TX TX Current August 2013

Bradshaw State Jail CCA Henderson TX TX Current August 2013

Bridgeport Pre-Parole Transfer Facility

CCA Bridgeport TX TX Current August 2013

Dawson State Jail CCA Dallas TX TX Current August 2013

Mineral Wells Pre-Parole Transfer Facility

CCA Mineral Wells TX TX Current August 2013

Willacy County State Jail CCA Raymondville TX TX Current August 2013

Cleveland Correctional Center GEO Cleveland TX TX Current January 2014

Lockhart Work Program Facility GEO Lockhart TX TX 2005 January 2013

Lindsey State Jail CCA Jacksboro TX TX Current August 2013

Billy Moore Correctional Center MTC Overton TX TX Current

Bridgeport Correctional Center MTC Bridgeport TX TX Current

Diboll Correctional Center MTC Diboll TX TX 2008

East Texas Treatment Facility MTC Henderson TX TX 2005

Kyle Correctional Center MTC Kyle TX TX Current

Sanders Estes Unit MTC Venus TX TX 2009

South Texas Intermediate Sanction Facility

MTC Houston TX TX Current

West Texas Intermediate Sanction Facility

MTC Brownfield TX TX Current

Lawrenceville Correctional Center GEO Lawrenceville VA VA Current Original contract Article61c mdash1495 out of 1500 beds 95

Lee Adjustment Center CCA Beattyville KY VT Current June 2013

1825 K St NW Suite 210 Washington DC 20006 202-739-1160

wwwInThePublicInterestorg

facebookcomInThePublicInterest

PubInterestPARTNERSHIP

forWorking Families

A c k n o w l e d g e m e n t S

In the Public Interest would like to thank Mike Brickner Jane Carter Alex Friedmann Caroline Issacs Justin Jones

Kerry Korpi Bob Libal and Kymberlie Quong Charles for their thoughtful and thorough comments and edits

We would also like to thank Open Society Foundations and The Public Welfare Foundation for their generous support of this report

Design and layout by Terry Lutz

Any errors or omissions in this report are the sole responsibility of In the Public Interest



Major Findingspound 65 percent of the private prison contracts ITPI received and analyzed included occupancy

guarantees in the form of quotas or required payments for empty prison cells (a ldquolow-crime taxrdquo)

These quotas and low-crime taxes put taxpayers on the hook for guaranteeing profits for private

prison corporations

pound Occupancy guarantee clauses in private prison contracts range between 80 and 100 with

90 as the most frequent occupancy guarantee requirement

pound Arizona Louisiana Oklahoma and Virginia are locked in contracts with the highest

occupancy guarantee requirements with all quotas requiring between 95 and 100 occupancy

State-specific Findingspound Colorado Though crime has dropped by a third in the past decade an occupancy requirement

covering three for-profit prisons has forced taxpayers to pay an additional $2 million

pound Arizona Three Arizona for-profit prison contracts have a staggering 100 quota even though a

2012 analysis from Tucson Citizen shows that the companyrsquos per-day charge for each prisoner has

increased an average of 139 over the life of the contracts

pound Ohio A 20-year deal to privately operate the Lake Erie Correctional Institution includes a 90 quota

and has contributed to cutting corners on safety including overcrowding areas without secure doors

and an increase in crime both inside the prison and the surrounding community



Introduction


















































S e c t i o n 1





































































S e c t i o n 2


















contracts
















n No clause

n 95 ndash 100

n 90 ndash 94

n Below 90

n Other




S e c t i o n 3


































article152065




























4000

3800

3600

3400

3200

3000SEPT2011

JAN2012

MAR2012

JUNE2012

SEPT2012

OCT2012





























































































to public control














justice system






S e c t i o n 4

Recommendations





























































expiration Date








































expiration Date



















MTC Meridian MS MS














MTC Marion OH OH





expiration Date





































forWorking Families









Introduction


















































S e c t i o n 1





































































S e c t i o n 2


















contracts
















n No clause

n 95 ndash 100

n 90 ndash 94

n Below 90

n Other




S e c t i o n 3


































article152065




























4000

3800

3600

3400

3200

3000SEPT2011

JAN2012

MAR2012

JUNE2012

SEPT2012

OCT2012





























































































to public control














justice system






S e c t i o n 4

Recommendations





























































expiration Date








































expiration Date



















MTC Meridian MS MS














MTC Marion OH OH





expiration Date





































forWorking Families

















S e c t i o n 1





































































S e c t i o n 2


















contracts
















n No clause

n 95 ndash 100

n 90 ndash 94

n Below 90

n Other




S e c t i o n 3


































article152065




























4000

3800

3600

3400

3200

3000SEPT2011

JAN2012

MAR2012

JUNE2012

SEPT2012

OCT2012





























































































to public control














justice system






S e c t i o n 4

Recommendations





























































expiration Date








































expiration Date



















MTC Meridian MS MS














MTC Marion OH OH





expiration Date





































forWorking Families
















































S e c t i o n 2


















contracts
















n No clause

n 95 ndash 100

n 90 ndash 94

n Below 90

n Other




S e c t i o n 3


































article152065




























4000

3800

3600

3400

3200

3000SEPT2011

JAN2012

MAR2012

JUNE2012

SEPT2012

OCT2012





























































































to public control














justice system






S e c t i o n 4

Recommendations





























































expiration Date








































expiration Date



















MTC Meridian MS MS














MTC Marion OH OH





expiration Date





































forWorking Families









S e c t i o n 3


































article152065




























4000

3800

3600

3400

3200

3000SEPT2011

JAN2012

MAR2012

JUNE2012

SEPT2012

OCT2012





























































































to public control














justice system






S e c t i o n 4

Recommendations





























































expiration Date








































expiration Date



















MTC Meridian MS MS














MTC Marion OH OH





expiration Date





































forWorking Families


































4000

3800

3600

3400

3200

3000SEPT2011

JAN2012

MAR2012

JUNE2012

SEPT2012

OCT2012





























































































to public control














justice system






S e c t i o n 4

Recommendations





























































expiration Date








































expiration Date



















MTC Meridian MS MS














MTC Marion OH OH





expiration Date





































forWorking Families

































































































to public control














justice system






S e c t i o n 4

Recommendations





























































expiration Date








































expiration Date



















MTC Meridian MS MS














MTC Marion OH OH





expiration Date





































forWorking Families









S e c t i o n 4

Recommendations





























































expiration Date








































expiration Date



















MTC Meridian MS MS














MTC Marion OH OH





expiration Date





































forWorking Families


































expiration Date








































expiration Date



















MTC Meridian MS MS














MTC Marion OH OH





expiration Date





































forWorking Families











forWorking Families







criminal how lockup quotas and low crime taxes guarantee profits for private prison corporations

Education

criminal justice

minimum square

tucson citizen

ed guarantee

colorado springs

bed guarantee

private prison

prison populations